Victorian government to expand vacant residential land tax

Just days after Dan Andrews stepped down, the new government has announced residents will be slugged with a shock new home tax.

Victorians will be slugged with a shock new tax to be rolled out on homes left unoccupied for more than six months, marking the new government’s first initiative since Dan Andrews stepped down as Premier.

Treasurer Tim Pallas announced the surprise move at an industry breakfast on Tuesday, just one day after the state’s new leader Jacinta Allan unveiled her first cabinet.

Victoria’s Vacant Residential Land Tax, a charge on homes that have been left unoccupied for more than six months, will be expanded to the entire state, including regional areas, from January 1, 2025.

Treasurer Pallas announced the latest housing tax to be unveiled by the Victorian government. Picture: NCA NewsWire / Luis Enrique Ascui

Why is the tax being introduced?

Currently, only properties in Melbourne’s inner and middle-ring suburbs are affected by the tax, which is charged at one per cent of the total value of the property.

Mr Pallas said the move would encourage landowners to develop land as Australia battles a housing crisis.

“We can’t afford really to have vacant land in metropolitan Melbourne sitting idle for year on year,” Mr Pallas said.

“Our clear message to landowners is to either develop the land or sell it to someone who will.

“Similarly we’re not putting in place a rule for landowners that we as a state are not going to apply to ourselves.

“We expect every government agency that is holding land to justify exactly why they’re holding that land and not putting it in the marketplace.”

The vacant land tax comes just weeks after former Premier Daniel Andrews introduced a levy on Airbnb and other short term accommodation. Picture: NCA NewsWire / Luis Enrique Ascui

The tax is also set to be expanded again in 2026 to include land that’s zoned as residential that has been unimproved for more than five years in Melbourne suburbs.

The treasurer said the tax currently collects $6m a year and that this tax would be used to “amend behaviour” as opposed to advantage the budget.

“We would much prefer not to get $1 out of tax that seeks to change behaviour. We’d prefer behaviour to change so that we can get people into homes,” he said.

Jacinta Allan engaged in a heated back in forth over the tax with Opposition Leader John Pesutto on Tuesday in her first Question Time as Premier. Picture: NCA NewsWire

Will the government adopt rent freezes or tax short stay rentals?

In Question Time on Tuesday, the Premier doubled down on the government’s opposition to a rental freeze.

This follows repeated calls from the Greens for Labor to implement a two-year rent freeze and a cap on rental increases to address the ongoing rental crisis.

“We’ve looked around the world, we’ve looked in other jurisdictions, and the evidence shows that they don’t work,” Ms Allan said.

“They only seem to … drive down the opportunities for renters to find a property.

“The issue that is causing rental increases is an issue of supply.”

The Greens’ call follows the announcement it will begin taxing Airbnbs and other short stay rental accommodation.

Former Premier Andrews announced the new 7.5 per cent levy on short stay rental providers, which aims to reduce the number of households leasing out homes to holiday makers over long term renters amid the housing crunch.

There are more than 36,000 short stay accommodation places in Victoria, 29,000 of which are entire homes.

Mr Pesutto was accused of using a ‘highly gendered attack on the premier’ during Question Time. Picture: NCA NewsWire / David Crosling

What is the opposition’s stance on the tax?

Liberals leader Mr Pesutto called into question whether the premier had known the tax would be announced on Tuesday morning and why it had not been introduced under the former premier.

“(These taxes) will add further cost pressures to Victorians struggling with the cost of living,” he said.

In a statement, Mr Pesutto said Tuesday’s Question Time had confirmed “nothing will change under this tired Labor government”.

“The Premier proudly stood by the introduction of two new taxes, the 51st and 52nd new or increased taxes under Labor since 2014,” he said.

This came after Mr Pesutto was slammed by Labor ministers for attempting to use a “highly gendered attack on the Premier” after he repeatedly called her “nasty” during Question Time.

Earlier this morning the Victorian shadow treasurer Brad Rowswell also hit out against the Labor government over the move.

“Victoria is broke and Labor’s only plan for ‘economic growth’ is to tax Victorians more,” Mr Rowswell said.